The Economist explains

How can America pay for its roads?

THE fuel efficiency of American vehicles has shot up in recent years, thanks to a blend of government mandates, environmental concerns and consumer fashion. By 2025 new vehicles must, by law, run at an average efficiency of 54.5 miles per gallon. That is good news for the environment and motorists (less petrol burned and bought for a given journey). But it is deeply worrying for governments. Roads and highways are funded by the state and federal taxes that drivers pay at the pump. Fewer petrol purchases means a drop in tax revenue. Since 2008 the federal Highway Trust Fund, which takes in gas-tax revenues, has had to borrow $41 billion from the Treasury to stay afloat. Officials warn it could go bust in 2015. State governments are facing similar shortfalls. How can they continue to pay for roads?

The most obvious answer is simply to bump up the petrol (gas) tax. There are strong arguments for this. The federal gas tax was last raised, to 18.4 cents per gallon, 20 years ago, around the time MS-DOS 6.2 was released. It is not indexed to inflation; since the last hike it has lost around 40% of its value. Most states also do not index their gas taxes. The Institute on Taxation and Economic Policy, a think-tank, reckons this loss of purchasing power accounts for 78% of the shortfall in federal gas-tax revenues. Moreover, the gas tax is easy and cheap to collect, and it incentivises people to drive less, which means fewer emissions.

Politicians, though, are terrified of touching the gas tax; many are quicker to call for its temporary suspension. But the change in driving habits points to a deeper difficulty. Petrol consumption used to serve as a reasonable proxy for road use, satisfying the "user pays" principle for road funding. But the rise of fuel-efficient vehicles (and electric cars, which of course pay no petrol taxes at all) has weakened the link. To get around this, officials in Oregon (which introduced America's first gas tax, in 1919), want to replace the gas tax with a vehicle-miles travelled (VMT) fee: charging motorists for the miles they drive rather than the petrol they consume. Smartphones or other GPS gizmos track journeys (so motorists are not charged for out-of-state driving), the data is processed (by a third party, if the driver prefers) and bills are sent periodically.

Oregon's legislature has been thinking about this since 2001, and has run two pilot schemes. The policy has been fine-tuned to satisfy privacy and environmental advocates. Yet a bill that would have applied a VMT fee to all new fuel-efficient cars flopped in this year's legislative session; instead, from July 2015 5,000 volunteers will take part in a scheme officials hope can in time be scaled up to a full-scale replacement for the gas tax (they will pay 1.5 cents per mile). What this long slog suggests is that the big challenge for VMT advocates will be political rather than technical. Many drivers will be extremely sceptical of government officials asking them to hand over their journey data. And legislators will take a lot of convincing to introduce a new tax; in many states, that requires a supermajority. Barack Obama's administration has dismissed the idea of a national VMT fee. Creative thinking will be needed.

The gas tax is indeed the fairest way to pay for roads. Why? Because road wear vs axle weight is exponentially related to about the 4th power. Simply stated, light weight cars wear out the roads much, much less than loaded dump trucks.

Just raise the gas tax to a level that supplies enough revenue. Too bad our politicians are afraid of the truth.

They do odometer readings when they issue the yearly inspection sticker, at least in this state. They could estimate, divide into pay periods and adjust from what they already collect as information.

As for doing this only for fuel-efficient cars - which are also more emissions efficient - I've heard this before and I keep wondering: why are people so interested in penalizing that which benefits society? Shouldn't the less efficient cars be taxed more? Isn't taxing aimed at reducing what society doesn't want and encouraging what it likes or needs?

Which is the very reason that a petrol tax, levied at the pump, is to be preferred. In other jurisdictions, the Federal government takes an excise and State governments take a tax at the wholesale end. Levied on volume it is simple and unavoidable - so all users pay according to their usage. Fuel-efficient or gas-guzzling, at the choice of the vehicle owner. That is equitable taxation.

Secondly it is simple and cheap to administer as the taxing authorities deal with a few, large entities rather than with a mass of people. As a consequence - and closer to my heart - this limits the number of public servants involved.

Nice thought, but any miles-travelled tax is vulnerable to endless forms of cheating, avoidance, and perverse incentives.

Honestly, raising the gas tax to (say) 40% of the total cost makes more sense. Then let's do the same for alcohol, tobacco, marijuana, and prostitution. That would be a nice step towards fixing the Federal budget, global warming, prison costs, obesity, and healthcare costs.

It would probably also result in the electoral defeat of the folks who voted for it... which, given the current Congress, is an even better outcome!

The damage to the road, and therefore the need for maintenance, is proportional to the miles travelled and increases disproportionately with the weight of the vehicle. If the desire is to charge for road maintenance in proportion with the damage that a vehicle does for the road, then we should have odometers checked once a year, then multiply that distance by a damage per mile factor which is a function of the fully loaded carrying capacity of the vehicle, multiplied by a price per unit damage. Transport trucks (lorries) would pay most of the cost, as they do most of the damage, and SUVs and pickups would pay twice as much as sedans because of their fully loaded weight.

Why not tax gas instead? Because the tax is to pay for road maintenance, not to discourage hydrocarbon use. The public would be far more open to an annually adjusted damage tax if they were shown that the tax collected directly matched the amount spent servicing the roads. They would be particularly open to it when it was shown that most of the tax should be paid by the heavy trucks that do most of the road damage. A truck that weighs 10X your sedan does 100X the road damage per mile. That's why turnpike tolls are so much higher for trucks. If that encourages more freight by rail, so be it.

GPS or smartphone VMT tracking? Honestly, just man up and raise the gas tax. Although, as I understand, a recent 10 mile extension of a toll road in Dallas cost over $900 million. It seems to me that we will never be able to provide an adequate supply of infrastructure for our commuter lifestyles, but we are so spoiled with our cars. Although I would like to ride the train, I do commute, but wish other people would drive less. Quite a conundrum!

The fairest and simplest...by far. People with big vehicles would pay more, true, but they argue their need for a big vehicle because it makes them feel "safer". They should pay for that privilege because what is "safer" for them is more dangerous for everyone in a small car.

Gas taxes goes to the coffers of state and local governments that miss manage it significantly. To index it based on inflation is to free these government institutions that are trusted to maintain and enhance our road network, from any semblance of efficiency and productivity.
I say forget about a gas tax as a means to maintain our roads. That is applying a European thinking that has not worked in Europe to America. American cities are not designed and built with public transport in mind. They are car centrist. To tax petrol is to tax the poor for they are the dominantly impacted group. They can least afford the newer higher fuel efficient models, they rely on their cars far more than the rich and upper middle class, and the extra taxes are a significant chunk of their pay cheque.
American roads can significantly do with technological innovation that can help reduce the cost of maintenance, and the bodies in charge of that maintenance have significant room for improvement. Heck just getting rid of the unions from the maintenance and repair crews will probably save America the budget shortfall.
Throwing just money at the problem is the complete wrong thing.

This bit is just wrong, embarrasingly so given the article's topic: "Roads and highways are funded by the state and federal taxes that drivers pay at the pump."

The federal highway trust fund has not been self-sufficient since 2008, and only pays for the federal portion of national highways. States generally fund their portion from general revenues, and local roads are almost always funded by general revenues. Overall gas taxes pay for only a minority of road costs.

By proposing that we all pay for roads, and not just drivers, isn't "Throwing just money at the problem" exactly what you're proposing?

If the costs of road infrastructure disproportionately affect the poor, the way to fix that is with rebates. Food costs disproportionately affect the poor, too, but we don't try to make food free, we give out food stamps.

In most US states, automobile insurance is mandatory so the problem of uninsured drivers is extremely rare. There are even ways for illegal immigrants to obtain insurance in those states where they can legally obtain drivers licenses.

But of course, it doesn't compensate victims or anything beyond damages and medical costs.

Also, if we're looking at indirect costs, why are you ignoring the benefits? For example, the highway system facilitates most freight transportation in the US, which leads to billions upon billions in tax revenues at both the state and federal level. After all, every item sold in Walmart or Costco generates additional revenue for the government.

Injuries are not entirely covered through insurance, due to the problem of uninsured or underinsured drivers. Since insurance minimums are only in the low 5 figures, and medical expenses can easily run into the 6 figures, it's easy to be underinsured.

And insurance only pays for medical bills, it does not compensate victims for being maimed for life (let alone killed).

Highway patrol departments do not make money, they cost money. A lot of it. I suppose that theoretically they could, but that is not the reality we have today.

Why not do away with the gas-tax and use systems like the ERP system in Singapore where the road users have to pay for specific portions of road used. It is no different to a toll but only more efficient.

Electric Car drivers won’t end up paying their fair share of road maintenance tax, and paying based on miles driven doesn’t indicate which state should receive the funding, so the government’s solution is to track everyone with GPS?

Whoever proposed that as a solution should be put against a pole and shot dead, and the economist should be recognized as the authoritarian propaganda that it is.

I think a three tier system of funding is required. One is a base transport taxing system which takes care of primary roads, public transport and other basic infrastructure. The second is a user-fee based, which could cover interstate highways and other freeway facilities based on distance / segments used (toll collection points). The third would be cordon-based road charging, and would cover vehicle access into congested center cities such as NY, the Chicago Loop, central SFO, etc. That way, both revenues and congestion management can be served.

Trucks can't run on batteries at the moment, but their freight can be moved on trains with far less fuel. I think that if we see a sustained period of higher gasoline prices more and more long distance shipping will be done by train. If big trucks can't improve their mileage as much as cars (which I don't think is necessarily a given), an very workable alternative technology is already staring us in the face.

As to the government knowing your whereabouts, maybe people could have two options: opt-in to the GPS and get to reclaim driving done outside the state, or stay out of it and just get your odometer read once a year (or twice a year or whatever) like they do with electricity meters in homes. That, along with some privacy safeguards like deleting data after a certain number of months, seems a reasonable compromise to me.

The vast majority of road space in the U.S. is local streets, which are paid for by general local taxes and not by motor vehicle-related taxes or charges, such as the gas tax or tolls.

The City of New York, in fact, does not maintain sidewalks, just the streets motor vehicles drive and park on, generally for free.

Meanwhile, railroads are expected to maintain their own rights of way without tax dollars. And pay property taxes on those rights of way. In fact, during the decades when Americans where shifting from transit to driving, private transit companies were taxed into bankruptcy (and public ownership) in part to pay for roads.